How Can I Balance
Saving for Education & Retirement?

Saving for retirement? Saving for further education? This shouldn’t be an either/or proposition. Virtually everyone juggles multiple savings or investment goals. Our aim at Arlo is to help you create a strategy that covers all of your targets sensibly.

It can be intimidating to think about how much you should save for both of these aspects of life, however, it doesn’t have to be. Take it one step at a time. A simple discussion with an experienced advisor can help you understand how the choices you make today about these aspects of saving may have an impact on your financial plan.

Outlining your priorities & understanding the trade-offs

The money you invest for your children and your own retirement ultimately comes from the same income stream. The question is how do you strike the right balance? It’s all about priorities and trade-offs.

Consider the following example:

Retirement Goal: Retire at age 65 with $50,000 in annual income from the portfolio. Education Goal: Provide $115,000 toward Lillian’s education.
Required Monthly Savings: $800 Required Monthly Savings: $300

To cover both goals, Paul and Lisa would need to save $1,100 per month. However, during the advice process they realise that they can only sensibly save only $900 per month, so they’re discussing their options and trade-offs.

Assumptions: Retirement portfolio must provide $50,000 in income using a 4% initial withdrawal rate. Retirement savings assume 7% annual return. Education savings assume 7% annual return to age 10, 6% to age 16 and 3% to age 18. Past performance is not a guarantee of future results. Graphic is for illustrative purposes only and does not reflect any currently available investments. Results do not take into account taxes or transaction fees. Results rounded to the nearest $5,000.

In this example, they had to make some trade-offs, such as retiring a little bit later and paying most, but not all, of the education costs. You may or may not need to do the same. Your answer is determined with how you prioritize your goals.

It is important to note, we don’t recommend putting off saving for retirement because you are putting money away for education expenses. This could put your retirement goal back so far it can in some cases become unrealistic. Time on your side is your most valuable asset, so don’t delay saving for one goal over the other – they can be achieved in unison.

How we can help

At Arlo, we understand your life is a series of overlapping decisions that often seem in conflict of one another. Your Arlo advisor will ask questions and really listen to understand your situation and develop a strategy to address what’s important to you. Call your Arlo advisor today to get started on your journey.